Critically discuss arguments for and against financial liberalisation Essay

Critically discuss arguments for and against financial liberalisation - Essay Example At this time, Korea also underwent significant demographic changes, where the majority of its population started residing in urban areas. While demonstrating the Korean changes Chang (1999, 31) used the term ‘compressed modernity,’ thus, aptly summarising these rapid changes. The high growth phase that lasted for almost four decades finally came crashing down in 1997, owing to the rippling effects of the Asian financial crisis that took place at around the same time in 1997- 98. After this episode, the Korean government brought in many financial changes, and while continuing with intensified financial market liberalization it followed the various recommendations given by the IMF with aims to improve the situation. Since the applications of these reforms, IMF had touted Korea’s macroeconomic recovery as being highly successful in nature. This is evident in a letter by the IMF’s Managing Director’s letter praising Korea's successful reforms which claim s, "the close cooperation between Korea and the IMF over the last few years has been exemplary and in many respects serves as a model for other countries" (News Brief No. 01/82, 2001). A majority of the researches on Korea’s recovery after the Asian crises, had attributed it to the polices of financial liberalisation and open markets. ... l interests at work, that are emulating and interacting constantly with each other, and was a result of reforms brought in by the Korean government that kept on changing, while also following the financial norms created by the former dictatorial regime. In this article, in view of the South Korean economy, studies will focus on the basic query as to whether financial liberalisation is actually the primary reason behind any country’s economy growth. Discussion What is financial liberalisation: Financial liberalization pertains to the adoptions of different measures in order to remove or lessen the stringent state regulatory mechanisms, which tend to control the functioning of the various financial institutions, and monitor the instrumental and agent activities within the various segments of the country’s economic market. These measures can be of two types, as regards a country’s internal or external regulations (Ghosh and Chandrasekhar, 2003). While working toward s internal financial liberalization, certain typical measures are followed, that may vary in certain degrees from country to country, as per the requirements, which are listed below (Ghosh, 2005, 2-4): A major step towards internal financial liberalisation includes elimination or alleviation in the controls on the return rates and interest rates, as are charged by the various operating financial agents, primarily the banks. However, the main central bank still continues to monitor and regulate the rate structures by its own functions in the liberal market economy and also through the process of adjusting the discount rates, offered by the other financial institutions. in an economy that operates under financial liberalisation the ‘interest rate ceilings’ are very often removed, thus allowing stiff